Comparison · Inheritance Tax & Estate Planning · 2026
Agricultural Property Relief vs Business Property Relief After April 2026 IHT Reform
The Autumn Budget 2024 fundamentally changed how Agricultural Property Relief and Business Property Relief work for larger estates. From 6 April 2026, both reliefs share a combined cap of £1,000,000 at 100% relief. Assets above that threshold only receive 50% relief -- creating an effective IHT rate of 20% on the excess. This guide explains what changes, what stays the same, and what planning steps farm and business owners should take.
TL;DR -- 30-Second Summary
- • Before April 2026: APR and BPR gave 100% IHT relief with no cap
- • From April 2026: combined £1m cap at 100%; only 50% relief above £1m
- • Effective rate above cap: 20% (40% IHT on 50% of excess)
- • NRB/RNRB: still separate -- £325k + £175k per person, transferable between spouses
- • AIM shares: still BPR-qualifying but now subject to the £1m cap
APR vs BPR: Side-by-Side Comparison
| Feature | Agricultural Property Relief (APR) | Business Property Relief (BPR) |
|---|---|---|
| What it covers | Agricultural value of farm land, buildings, farmhouses | Trading business interests, unquoted shares, AIM shares |
| Relief rate (up to £1m cap) | 100% | 100% (unquoted); 50% (quoted controlling stake) |
| Relief rate (above £1m cap) | 50% -- effective IHT 20% | 50% -- effective IHT 20% |
| Qualifying period | 2 years owner-occupied; 7 years let | 2 years ownership |
| Trading test | Must be agricultural use | Must be trading -- not mainly investment |
| Covers development hope value? | No -- agricultural value only | Potentially, if part of a trading business |
| Cap (from April 2026) | Combined £1m per person across both APR and BPR | |
How the Old Rules Worked (Pre-April 2026)
Before the April 2026 reform, both APR and BPR gave 100% relief on qualifying assets with no upper limit. A farmer passing on a £5m farm entirely composed of agricultural land would pay zero IHT on that farm (assuming all conditions were met), regardless of value. Similarly, an entrepreneur with £10m of unquoted trading company shares could pass those shares to children with no IHT charge, provided the two-year ownership and trading conditions were met.
This made APR and BPR the most powerful IHT exemptions in the UK tax system -- far more generous than the nil rate band or any other relief. The reliefs were designed to prevent forced sales of farms and family businesses to pay inheritance tax, but critics argued the unlimited nature of the reliefs benefited the wealthiest estates disproportionately.
The April 2026 Reform: £1m Cap and 50% Relief Above It
The Autumn Budget 2024 announced a fundamental change taking effect from 6 April 2026. The combined APR and BPR relief is capped at £1,000,000 per person at 100% relief. For assets qualifying for APR or BPR above that £1m threshold, relief drops to 50%, meaning half the excess value enters the taxable estate.
At the standard 40% IHT rate, the effective rate on the excess above £1m is 20%. This is a significant change for larger farms and business estates but leaves smaller farms and businesses -- with total qualifying assets under £1m -- entirely unaffected by the reform.
| Qualifying asset value | IHT before April 2026 | IHT from April 2026 | Additional IHT |
|---|---|---|---|
| £500,000 | £0 | £0 | £0 |
| £1,000,000 | £0 | £0 | £0 |
| £2,000,000 | £0 | £200,000 | £200,000 |
| £5,000,000 | £0 | £800,000 | £800,000 |
| £10,000,000 | £0 | £1,800,000 | £1,800,000 |
Note: figures assume all assets qualify fully for APR/BPR and that no NRB/RNRB is available against qualifying assets. In practice the NRB and RNRB can further reduce the charge.
Differences Between APR and BPR in Practice
Despite sharing the same £1m cap from April 2026, APR and BPR have different qualifying conditions and cover different types of asset. A key difference is what each relief covers in terms of value. APR only applies to the agricultural value of the land -- not any development premium. Where farmland has development potential (and therefore a market value significantly above its agricultural value), the excess may qualify for BPR if the farming activity constitutes a trading business, or it may be fully exposed to 40% IHT if it does not.
BPR is broader in scope: it covers unquoted trading company shares, sole trader business assets, partnership interests, and AIM-listed shares. The critical test for BPR is the trading vs investment distinction. A company or business that is wholly or mainly investment in character -- for example, a property holding company or a company whose primary activity is holding a portfolio of shares -- does not qualify for BPR.
For mixed farms that also include holiday lets, glamping, or other non-agricultural activities, careful analysis is needed to separate APR-qualifying assets from non-qualifying assets and to assess whether BPR covers any non-agricultural trading elements. Mixed-use estates often require a professional valuation and legal advice to determine the correct allocation between APR, BPR, and unrelieved value.
IHT Planning After April 2026: Key Strategies
- 1.Lifetime gifts: Gifts of qualifying assets made before death start the seven-year clock for potentially exempt transfers (PETs). Gifts made before 6 April 2026 may benefit from the pre-reform 100% relief if the donor survives seven years.
- 2.Spouse exemption: Assets passing between spouses are IHT-free. Spouses each have their own £1m APR/BPR cap. Restructuring ownership between spouses can effectively double the cap to £2m for a married couple.
- 3.NRB/RNRB planning: Use the £325k NRB and £175k RNRB against non-APR/BPR assets (cash, investments, residential property not covered by RNRB) to maximise the overall tax-free estate.
- 4.Will structuring: Ensure wills direct the £1m APR/BPR cap to the highest-value qualifying assets and that the NRB is applied where it provides the greatest saving.
- 5.Life insurance: For unavoidable IHT on excess assets, a whole-of-life policy written in trust can provide funds to meet the IHT bill without forcing a sale of the farm or business.